Time Warner shares have a market capitalization of $70 billion. The company is expected to pay a dividend of $0.35.per share and each share trades for $20. The growth rate in dividends is expected to be 8% per year. Also, TimeWarner has $15 billion of debt that trades with a yield to maturity of 8%. If the firm's tax rate is 25%, computethe WACC?O A. 9.09%B. 7.72%C. 8.63%OD. 8.18%

WACC is the short acronym of weighted average cost of capital.

Answered: Time Warner shares have a market…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Suppose a firm's debt is selling for one-half of its face value of $1,000. It matures in 10 years and has a coupon rate of 5%. To the nearest percent, what is the pre-tax cost of this firm's debt? O 11% O 12% O 13% O 15%
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8
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